Quote from Vishnu:
Maybe I should pose my argument a different way:
Would I allocate money to trend following funds right now? Absolutely not. I've been saying this in writing since 2003 and the results of the major trend followers have proven me correct.
Would I recommend someone start a trendfollowing fund? No. I think that strategies that are not just "hot" but have withstood the test of time are activist investing, asset-backed lending, PIPES, and a few others that I've mentioned in my books. Buffett has been doing the above strategies for 50 years and has barely had a down year, let alone a drawdown of 60% or more that many of these guys suffer through. And many other billionaires have been minted with the above techniques.
As to what my credentials are to say this? Probably none. Do your own research. Don't even buy my lousy books. Read other books that are much better. And if you want to put all your money in Henry's funds then fine, do it. I have no skin in that game either.
Yes, if you're referring to Buffett and his berskshire hathaway stock it had a monthly all-time high back in June of 1998 that was not surpassed until the month of November 2003. That's a little over 5 years that investors had to wait in order for these "strategies that have stood the test of time" to kick in and start making them money again. Oh, and those investors had to endure a 35% drawdown from that peak back in June98 to the bottom in Jan00.
Of course, I'm sure all remember the wallflowers coming out and declaring value investing is dead back in the very late 90's and early 2000. Hell, even hammering Buffett...much like Vishnu and surfer are hammering the current trend-followers.
Maybe the best option to end this silly debate is two-fold:
1) Realize things change...some styles go out of favor and others come back in favor. Declaring them dead or over is either a) showing your naivety or b) trying to draw attention (in this case to a book).
2) Let's just quote good ol' Altucher from his book, Trade Like a Hedge Fund, written just 2 years ago:
"We can see in the results that the maximum drawdown from peak to low was slightly over 58 percent. Nevertheless, this system greatly out-performed the market from 1998 to 2003 and was able to benefit massively during extreme bull market moves. Again, having a trend-following system in your arsenal is an important weapon in addition to the various countertrend systems we have demonstrated in this book" - in reference to a variation of a Turtle System Altucher created for his "20 Successful Uncorrelated Strategies & Techniques to Winning Profits".
"One time I came across a fund that was down 22 percent in its first year of business and only up 3 percent in its second year. I cannot imagine the pain those guys must have gone through. But 18 years later Dunn Capital is one of the biggest CTAs in the database (IASG) with over $1B in assets and an annualized return of almost 20 percent."
Finally, Vishnu & surfer do have their points on survivorship bias in the markets...and it is everywhere...
http://www.tradingblox.com/forum/viewtopic.php?t=1652.
And whether the bias is to the negative or positive...it makes it difficult to judge a strategy, fund manager, or even an author fully.
MT
